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Home My WebLink AboutM-94-0558CITY OF MIAM{, FLORIDA INTER -OFFICE MEMORANDUM 13 TO: Honorable Mayor and DATE JUL 1 9 Iacf FILE Members of. the City Commission SUBJECT Discusson on the proposed sales price & buyer select- ion process for the St. Cesa o Hugh Oaks Village Condo - FROM City REFERENCES: minlum Project City Commission Agenda ENCLOSURES: Item - July 14, 1994 At the February 17, 1994 City Commission meeting, a request was made to provide a status report on the City -sponsored St. Hugh Oaks Village Condominium project currently under construction in the Coconut Grove neighborhood. More specifically, the request centered around the proposed sales price of the homes being developed, in addition to the selection/marketing process that will be utilized by the City. At the April 14, 1994 City Commission meeting, a report was presented by the Department of Development and Housing Conservation, outlining the staff's recommendations as to the proposed sales prices and buyer selection process for the City sponsored St. Hugh Oaks Village Condominium project. On that date, members of the Coconut Grove Homeowners and Tenants Association, requested that the City Commission adopt: a resolution prepared by their organization, which stipulated that at least 11 units of the St. Hugh Oaks Village project be sold to African American buyers and furthermore, that at least 6 of the eleven units be sold to buyers with historic, cultural or civic ties to the black community of Coconut Grove. After the question of the legality of this request was discussed, the City Comr.,..ssion passed a motion directing the Law Department and City Adm:i.nistration to initiate a study, to ascertain whether or not there has been discrimination in connection with the assignment of housing units in the City. A study performed by the City Administration in conjunction with the Law Department, regarding the various housing programs provided by the City of Miami, concluded that the City of Miami has not discriminated against African Americans in the provision of housing. It was further determined that areas in the City of Miami which are of predominately African American residents have received a greater amount of housing assistance, compared to those areas resided predominately by members of other ethnic groups. 558 9AI 559 94- 560 y Honorable Mayor and Members of the City Commission Page 2 The project's construction phase is well underway, with a completion date estimated for mid -September. It is important that the sales prices as well as the selection process be finally determined. Once this has been done, staff would be able to commence the pre -approval process of the potential buyers and marketing of the units. The ultimate objective would be to have already determined who would be the buyers of the units at the time that the certificates of occupancy are issued, eliminating the possibility of having vacant completed units, that would be subject to vandalism. PROPOSED SALES PRICES: The projected total development cost for the St. Hugh Oaks Village Condominium Project is $3,570,000. This amount includes the following: Land Cost $1,071,000 Construction Cost $2,374,000 Architectural Fees S 125.000 $3,570,000 Based on the City's actual cost for developing the St. Hugh Oaks parcel, the homes would have to be marketed at $155,217/unit ($3,570,000 / 23 homes) in order for the City to recapture its total cost of developing the St. Hugh Oaks property. Considering the total cost incurred by'the City in the development of the St. Hugh Oaks parcel, the City Administration is recommending that these homes be marketed at $115,000. At the sales price of $115,000, the City would be able to recapture its construction cost of $2,499,000 and $6,347/unit of site acquisition cost. Presently, the City is proposing to market these homes under the FHA 203(b) Program. The maximum mortgage amount under the FHA 203(b) Program is $112,350 for a single family home. Generally speaking, housing is considered affordable when the family's monthly housing costs do not exceed approximately one- third (1/3) of a family's monthly income. At the sales price of $115,000, the homes would be affordable to moderate income families and enable the City to recapture all of the City's construction cost plus some of the land cost. Honorable Mayor and Members of the City Commission Page 3 Attached in Exhibit "A" is an analysis of the different sale prices that can be established for the homes that would still insure that the homes remain affordable to moderate income families as well as enable the City to recapture certain levels of its actual construction cost. HOMEBUYER SELECTION PROCESS Another significant concern related to the sale of these units has been the method of selecting the buyers. A method that would be fair as well as efficient has been a concern of the Members of the Commission. The City Administration is considering a lottery system as the fairest method. In short, at the time that these homes are ready to be marketed, the availability of these homes would be advertised for a period of thirty (30) days. During this time the Administration would begin to pre -qualify the applicants based on FHA lending guidelines. All of those pre -qualified prospective buyers would be placed in a lottery, and the first 23 selected would be the first eligible buyers. The pre -qualified applicants that were not selected among the first 23 would be placed on a waiting list. ThF,.;e families would be offered a purchase contract only in the -_,vent that any of the fi.r_st 23 buyers fail to obtain financing during the full application and qualification process. i EXHIBIT "A" COST i Land $1,071,000 :4 Construction $2,374,000 i Architects S 125,000 Total Cost $3,570,000 ESTIMATED SALES PRICES Recapture all cost - $155,217 Recapture all cost less 25% of land = $143,576 Recapture all cost less 50% of land = $131,934 Recapture all cost less 75% of land = $120,293 Recapture all cost less land = $108,652 Recapture all cost less land & arch. - $103,217 Recapture original const. cost only = $ 98,173 Estimated sales price of $115,000 would recapture all cost less 86% of land cost. This results in the return of I $146,000 of the land cast or $6,347./Lot. i 1 AFFORDABILITY The units are being' marketed to target moderate income families. Moderate income is defined as an annual gross household income ranging from 81% to 140% of the median income adjusted for family size. The following affordability analysis takes into consideration a family of four, which would be a typical family to purchase the 3 bedroom units. These units will be purchased utilizing FHA financing, therefore the following, is taking into consideration FHA qualifying criteria. Family Size 4 Dade County Median Income $35,700 Moderate Income - up to $49,980 4- 558 DEBT SERVICE ANALYSIS Sales Price $115,000 Downpayment @ 3% (est.) _ $ 3,450 Mortgage Amount - $111,550 $111,550 @ 8 @ 30 year amortization = $818.51 Plus maintenance (est) = 75.00 Plus taxes ($2,000 yr) = 166.00 Total PITI = $lr059.51 FHA limits allow for total principal, interest, taxes, and insurance (PITI) not to exceed 29% of a household expense to gross monthly income, and 41% including other monthly expenses such as credit cards, personal loans, etc. This means that the above total payment would be 29% of an income of $3,653.49/month or $43,842.00 which is within a moderate income range. In addition a moderate income family could also have other monthly expenses totalling $600 a month and qualify for the FHA loan. $1,059.51 + 600 = $1,659.51 / .41 _ $4,047.58 x 12 = $48,571.02. The following indicates the minimum income requirements to qualify for a FHA mortgage to assist in the purchase of these units. This would be assuming a family of 4 who has additional expenses of $600 per month. Minimum Estimated Total Housing Annual % of Sales Price Mtg. Amt. Expense (PITI) Income Median $120,000 $116,400 $1,095.10 $49,612 139% $115,700 $112,243 $1,064.60 $48,720 136% $108,650 $105,390 $1,014.31 $47,248 132% $103,220 $100,123 $ 975.67 $46,117 129% $ 98,180 $ 95,235 $ 961.81 $45,711 128% $ 90,000 $ 87,300 $ 881.57 $43,363 121% $ 85,000 $ 82,450 $ 845.98 $42,321 119% $ 80,000 $ 77,600 $ 810.40 $41,280 116% 94- 558 944 55 �� . 5 - l